SoftBank Initiates Share Buyback Worth ¥500 Billion – Bets on AI Investments

SoftBank Group has announced a share buyback worth up to ¥500 billion (approximately 3.4 billion USD) following a drop in its stock price due to heavy selling and pressure from activist investors such as Elliott Investment Management. The Tokyo-based technology investor aims to repurchase up to 6.8% of its outstanding shares by August, according to a statement. The buyback occurs as founder Masayoshi Son mobilizes resources for extensive investments in artificial intelligence. This happens at a time when investors are reassessing the impact of AI on profits and the stock market is experiencing a correction. Earlier this week, SoftBank's stock suffered a massive price drop, although it partially recovered in the following days, but it still remains significantly below the July record high, representing a loss in value exceeding 40 billion USD. "Son has a history of major buybacks when the going gets tough, and this seems to be no exception," noted Andrew Jackson, Head of Japan Equity Strategy at Ortus Advisors. Such moves are not new for Son; during the Covid pandemic, SoftBank invested about ¥4 trillion in stock buybacks. On the same day, SoftBank reported a smaller net loss of ¥174.28 billion in the June quarter, compared to a loss of ¥477.62 billion in the previous year. Solid earnings from the chip unit Arm Holdings helped offset the continued losses of Vision Fund assets. SoftBank still has numerous loss-making startups in its Vision Fund, most of which are young, unlisted companies. Simultaneously, the company has significant cash reserves, and its ability to raise funds has significantly increased with Arm's IPO last year. Additional revenue was generated from the sale of T-Mobile US shares to Deutsche Telekom in 2020. Amid recent market turbulence, Son stated in February that he was ready to invest about 100 billion USD in AI-related chips. Last month, SoftBank acquired the British semiconductor startup Graphcore, which specializes in developing chips for AI programs. According to Mitsunobu Tsuruo of Citigroup, SoftBank is poised to make significant future investments to foster collaboration with Arm. Son increasingly seeks to make investments directly through the SoftBank holding, while the Vision Fund has slowed its investment pace and has been selling shares. Instead, the Vision Fund team is now increasingly advising the holding on potential targets. According to Bloomberg Intelligence, SoftBank is pursuing a risk-taking investment strategy that could lead to more volatile earnings patterns. The increasing focus on hardware and infrastructure for AI development could be costly and might have cyclical or long-term amortization periods. In the short term, earnings could essentially hover around the breakeven point.